Inflation has always been a problem for many countries, especially those in developing nations. With the rise of cryptocurrencies and the popularity of Bitcoin, many Argentines and Turks are turning to these digital coins as a way to protect their wealth from the ravages of inflation.
The Cryptoverse, as it’s commonly known, is a global network of digital currencies that operates independently of traditional banking institutions. This decentralized system is based on blockchain technology, which is a secure way of verifying transactions without the need for a central authority.
Argentines and Turks have both been hit hard by inflation in recent years. In Argentina, the annual inflation rate reached almost 47% in 2020, while in Turkey, it reached as high as 16% in the same year. This has led many individuals to seek alternative methods of storing and protecting their wealth.
One such method is the use of cryptocurrencies like Bitcoin. Unlike traditional currencies, digital coins are not linked to any central bank or government. This means that they are not subject to inflationary pressures and can be used as a more stable means of exchange.
In Argentina, Bitcoin has become increasingly popular as a hedge against inflation. The country has a strong community of crypto enthusiasts, with local exchanges and trading platforms proliferating rapidly in recent years. These platforms offer a secure and convenient way for people to buy and sell Bitcoin, as well as other digital coins like Ethereum and Litecoin.
In addition to trading, many Argentines are also using cryptocurrencies to store their wealth. With the legacy financial system in the country plagued by corruption and uncertainty, digital coins offer a more transparent and secure way of holding assets. This is particularly true for those who have lost faith in the traditional banking system and are looking for an alternative store of value.
Similarly, Turkey has seen a surge in interest in cryptocurrencies in recent years. Again, this is largely due to the country’s high inflation rate, which has eroded the value of the local currency, the Turkish lira. Many Turks have turned to Bitcoin as a way of protecting their savings and avoiding the uncertainties of the local financial system.
As with Argentina, Turkey has a thriving crypto ecosystem, with local exchanges and trading platforms catering to the needs of a growing community of digital currency enthusiasts. Many investors are also looking to profit from the volatility of these coins, buying when prices are low and selling when they rise.
Of course, there are risks associated with investing in cryptocurrencies, including the risk of losing one’s investment due to price fluctuations or technical failures. However, for many people in Argentina and Turkey, the benefits of digital coins – particularly their ability to protect against inflation – outweigh the risks.
Moreover, cryptocurrencies are increasingly being viewed as a legitimate asset class, with many professional investors and institutions entering the market. As the world becomes more digitally connected, it seems likely that digital currencies will only continue to grow in popularity and adoption.
In conclusion, the Cryptoverse offers a compelling alternative for those seeking to protect their wealth from inflationary pressures. While there are risks associated with investing in these digital coins, they offer a more transparent, secure, and stable means of exchange than traditional currencies. As more people around the world embrace cryptocurrencies, it seems likely that this emerging asset class will become increasingly important in the global financial landscape.
Cryptocurrencies have become a popular safe-haven investment in countries such as Turkey and Argentina where high inflation and tumbling local currencies have forced people to look for alternatives. According to research firm GWI, ownership of digital currencies in Turkey is the highest in the world at 27.1%, followed by Argentina at 23.5%. This is well above the global crypto ownership rate of 11.9%.
Both Turkey and Argentina have experienced high inflation in recent years, leading to crumbling currencies and capital controls to deter local residents from taking money out. Annual inflation was reported at 50.51% in March for Turkey, and even higher at 104% for Argentina. As a result, the lira and peso have been plunging and are at record lows, with the peso trading around 464 per dollar on the black market – more than double the official exchange rate of 222.
Investors in these countries have turned to stablecoins such as USD Coin (USDC) and Tether (USDT) to hedge against currency devaluation. Stablecoins are crypto tokens pegged one-to-one to a traditional asset such as the US dollar or gold, giving investors an alternative to scarce dollars. Trading volumes for the USDT-Turkish lira pair have reached a multi-month high, driven by the weakening of the Turkish currency and upcoming presidential and parliamentary elections.
Overall, bitcoin, the world’s biggest and best-known cryptocurrency, is up 72% this year at $30,000, its highest in 10 months. However, overall trading volumes are far from levels seen last summer after investors were spooked by a series of collapses of crypto players culminating in FTX’s demise. Trading volumes for spot bitcoin are highest during US opening hours, with little change from 2022, according to data from Kaiko.
Regulatory issues faced by crypto exchange Binance in recent months have led to a slight shift in derivative trading volume towards Asia Pacific hours from Americas, Kaiko said. If dollar to crypto volumes are excluded, the next most dominant currency is South Korea’s won. Crypto trading volumes in South Korea are back to levels seen in the first and second quarters of 2022 after a weak fourth quarter, according to analysts at crypto investment firm Matrixport. Altcoins dominate the South Korean market, which is in stark contrast to other crypto exchanges where bitcoin and Ethereum account for the majority of the volume.
In conclusion, volatile cryptocurrencies may have become safe-haven investments in countries such as Turkey and Argentina, but they are not immune to market fluctuations. As the crypto market evolves and becomes more regulated, it will be interesting to see if more stablecoins emerge and become a go-to investment for those seeking a hedge against the devaluation of local currencies.
